city of pontiac retired employees ass'n v. schimmel, no. 12-2087 (6th cir. aug. 9, 2013)

7/27/2019 City of Pontiac Retired Employees Ass'n v. Schimmel, No. 12-2087 (6th Cir. Aug. 9, 2013)

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*The Honorable James S. Gwin, United States District Judge for the Northern District of Ohio,

sitting by designation.

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit I.O.P. 32.1(b)

File Name: 13a0215p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT_________________

CITY OF PONTIAC RETIRED EMPLOYEESASSOCIATION;DELMERANDERSON;THOMASHUNTER;HENRY C.SHOEMAKER;YVETTETALLEY;DEBRA WOODS;JOHN CLAYA,

Plaintiffs - Appellants,

V.

LOUIS SCHIMMEL,Individually and in his

capacity as Emergency Manager of the Cityof Pontiac;CATHY SQUARE,Individually andin her official capacity as the Director ofHuman Resources and Labor Relations forthe City of Pontiac;CITY OF PONTIAC,

Defendants - Appellees.

X---->,-----

------

N

No. 12-2087

Appeal from the United States District Courtfor the Eastern District of Michigan at Detroit.

No. 2:12-cv-12830Lawrence P. Zatkoff, District Judge.

Argued: January 15, 2013

Decided and Filed: August 9, 2013

Before: COLE and GRIFFIN, Circuit Judges; GWIN, District Judge.*

_________________

COUNSEL

ARGUED: Alec Scott Gibbs, LAW OFFICE OF GREGORY T. GIBBS, Flint,Michigan, for Appellants. Stephen J. Hitchcock, GIARMARCO, MULLINS &

HORTON, P.C., Troy, Michigan, for Appellees. ON BRIEF: Alec Scott Gibbs,

Gregory Thomas Gibbs, LAW OFFICE OF GREGORY T. GIBBS, Flint, Michigan, forAppellants. Stephen J. Hitchcock, GIARMARCO, MULLINS & HORTON, P.C., Troy,Michigan, for Appellees.

GWIN, D. J., delivered the opinion of the court, in which COLE, J., joined.GRIFFIN, J. (pp. 18-35), delivered a separate dissenting opinion.

1


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No. 12-2087 City of Pontiac Retired Employees Assn, et al.v. Schimmel, et al.

Page 2

_________________

OPINION

_________________

GWIN, District Judge. Like many Michigan municipalities, the City of Pontiac

has experienced significant economic difficulties, especially since the 2008 financial

collapse. To address Pontiacs problems, Michigans Governor appointed Louis

Schimmel as Pontiacs emergency manager. Acting under Public Act 4, Michigans

then-existing emergency manager law, Schimmel modified the collective bargaining

agreements of Pontiacs retired employees. He also modified severance benefits,

including pension benefits, that Pontiac had given to other retirees not covered by

collective bargaining agreements. In this case, those retired employees challenge the

emergency managers power to reduce their retirement benefits.

The retired employees say that Schimmel and Pontiac violated their federal

constitutional rights, including rights given under the Contracts Clause, the Due Process

Clause, and the Bankruptcy Clause. The retired employees do not specifically argue that

Schimmel violated Michigans Constitution when he changed their pension rights. But,

the Michigan Legislature may have violated the Michigan Constitution when it passed

Public Act 4. In addition, Michigan voters rejected Public Act 4 by referendum, and this

rejection may have rendered Schimmels actions void.

Despite the parties inadequate briefing of these state-law issues, we decline to

decide the case on federal constitutional grounds. Because state law could provide analternative basis for deciding this case, we VACATE andREMAND to the district court

to conduct additional fact-finding and consider these state-law issues. Specifically, did

two-thirds of both houses of the Michigan Legislature vote to make Public Act 4

immediately effective? And, since Michigan voters rejected Public Act 4 in a

referendum, do the acts taken under the rejected law have any power? Because similar


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issues face many Michigan municipalities, we ask the district court to expedite

consideration of the remanded case.

I.Background

A. Michigans Emergency Manager Laws

Emergency Manager Louis Schimmel (the Emergency Manager) changed

contractual and pension commitments under Public Act 4. Public Act 4 is not

Michigans first law governing emergency managers, but it is the first legislation that

allowed emergency managers to break collective bargaining agreements and to ignore

retirement commitments. Mich. Comp. Laws 141.1501-1531 (rejected by referendum

2012). In 1990, the Michigan Legislature enacted a predecessor to Public Act 4, the

Local Government Fiscal Responsibility Act (Public Act 72). Mich. Comp. Laws

141.1519(1)(j) (2005). Public Act 72 established a procedure for Michigans Governor

to appoint emergency managers, and gave those emergency managers the power to

address local governments financial crises. But Public Act 72 did not give emergency

managers the power to modify collective bargaining agreements or pension rights.

Critics of Public Act 72 complained that it did not give emergency managers the powers

sometimes necessary to address municipalities structural budget problems, especially

financial problems flowing from pension commitments. Critics called for a new law,

and Public Act 4 was born.

In March 2011, Michigans Governor signed Public Act 4 into law. 141.1503.

Unlike Public Act 72, Public Act 4 gave emergency managers the power to temporarily

reject, modify, or terminate existing collective bargaining agreements. Id. at

141.1519(1)(k), (k)(iv). Public Act 4 also repealed Public Act 72. Id. at 141.1503

(enacting 1).

As we discuss, Michigans Constitution purposely makes it difficult for laws to

take immediate effect. Generally, laws do not become effective until ninety days after

the end of the legislative session in which they are passed. Mich. Const. art. IV, 27.


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1In August 2012, after litigation over the petition, the Michigan Supreme Court ordered the Board

of State Canvassers to certify the referendum for the November ballot. Stand Up for Democracy v. Secyof State, 822 N.W.2d 159, 161 (Mich. 2012). That certification suspended the operation of Public Act 4pending the outcome of the referendum. Mich. Comp. Laws 168.477(2) (a law that is the subject of thereferendum continues to be effective until the referendum is properly invoked).

2See Mich. Const. Art. II, 9 (The power of referendum does not extend to acts making

appropriations for state institutions or to meet deficiencies in state funds).

However, this general rule does not apply if two-thirds of each house in the Legislature

vote to make the law take immediate effect. Id. Public Act 4 passed by only a narrow

margin. Nevertheless, the Michigan Legislature claims that two-thirds of its members

voted to make Public Act 4 become immediately effective.

Michigan also has a voter rejection procedure that allows citizen-initiated

rejection of Michigan legislation. In response to Public Act 4, critics collected enough

signatures to have Michigan citizens vote on whether Public Act 4 should be rejected.1

On November 6, 2012, Michigan voters rejected Public Act 4 by a fifty-two percent to

forty-eight percent margin. Michigans citizens cancelled Public Act 4.

Apparently unaffected that voters had just rejected Public Act 4, the Michigan

Legislature enacted, and the Michigan Governor signed, Public Act 436. Public Act 436

largely reenacted the provisions of Public Act 4, the law that Michigan citizens had just

revoked. In enacting Public Act 436, the Michigan Legislature included a minor

appropriation provision, apparently to stop Michigan voters from putting Public Act 436

to a referendum.2

Mich. Comp. Laws 141.1574, 1575.

B. City of Pontiac

In March 2009, Michigans Governor appointed Schimmel as Pontiacs

emergency manager under Public Act 72, Michigans then-controlling emergency

manager law. Although Schimmel has managed Pontiac for a number of years, Pontiac

continues to struggle. Currently, Pontiacs liabilities to the benefit plans of its

employees is its greatest expense, totaling $302 million.


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3The Pontiac collective bargaining agreements at issue deal primarily with healthcare benefits.

4SeeWelch v. Brown, No. 1213808, 2013 WL 1292373, at *13 (E.D. Mich. March 29, 2013).

With the passage of Public Act 4 and for the first time, Michigan gave emergency

managers the power to change collective bargaining agreements and the power to stop

pension benefits. In December 2011, the Emergency Manager modified Pontiacs

collective bargaining agreements to shift a large portion of the citys benefits

obligations onto its employees.3

Among the changes, Pontiac cancelled disability,

vision, and hearing coverage; increased annual deductibles; and cut pensions. This case

resulted.

C. Procedural History

In June 2012, the City of Pontiac Retired Employees Association and a group of

retired employees (collectively the Retired Employees) filed this putative class action.

They alleged several federal claims, including the unconstitutional impairment of

contract, preemption under federal bankruptcy law, and deprivation of a property interest

without due process of law. With the complaint, the Retired Employees filed a motion

for a temporary restraining order (TRO) and a motion for a preliminary injunction to

stop certain Emergency Manager orders from taking effect. In July 2012, the district

court denied the TRO motion and denied the motion for a preliminary injunction. TheRetired Employees appealed.

II. Law and Analysis

As became clear during oral argument, both parties ask this Court to reach the

substantive merits of their dispute. But doing so requires us to resolve important federal

constitutional issues, which are closer questions than the dissent suggests. Unlike the

district court here, another Michigan federal district granted injunctive relief when faced

with similar federal questions.4 Against this backdrop, the better course of action asks

the district court to see if state-law issues could avoid the need to rule on the federal

claims. Because state law could provide an alternative basis for deciding this case, the


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more prudent approach is to allow the district court to conduct additional fact-finding

and to consider the state-law issues.

A. Constitutional Avoidance

Under the doctrine of constitutional avoidance, we avoid constitutional

determinations when a case can be resolved on other grounds. SeeAshwander v. TVA,

297 U.S. 288, 347 (1936) (Brandeis, J., concurring) (It is not the habit of the court to

decide questions of a constitutional nature unless absolutely necessary to a decision of

the case.) (internal citation and quotation marks omitted); see alsoMuller Optical Co.

v. EEOC, 743 F.2d 380, 386 (6th Cir. 1984) (The duty to avoid decisions of

constitutional questions . . . [is] based upon the general policy of judicial restraint.).

When a case can be resolved on state constitutional grounds, we should decide the state

issue so as to avoid rendering a decision under the Federal Constitution. SeeSiler v.

Louisville & Nashville R.R. Co., 213 U.S. 175, 191 (1909) (This court has the same

right, and can, if it deem it proper, decide the local questions only, and omit to decide

the federal questions, or decide them adversely to the party claiming their benefit.)

(citations omitted).

The dissent would decide the Retired Employees contracts clause and due

process claims. But these federal constitutional issues are closer questions than the

dissent suggests. If the Michigan Legislature gave Public Act 4 immediate effect in

violation of the Michigan Constitution, or if the voters rejection of Public Act 4 by

referendum rendered the Emergency Managers actions void, we could avoid the federal

constitutional issues. Doing otherwise forces us to decide federal constitutional

questions and potentially render an advisory opinion. We should avoid this if we can.

B. Waiver

What should a court do when the parties fail to raise an obvious issue? Here,

neither the Retired Employees nor Schimmel raised the issue of whether the Michigan

Legislatures giving Public Act 4 immediate effect violated the Michigan Constitution.


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5There, the United States Court of Appeals for the District of Columbia Circuit reversed the

district courts judgement based on a theory that neither party argued to the district court or the court ofappeals. See Indep. Ins. Agents of Am., Inc. v. Clarke, 955 F.2d 731 (D.C. Cir. 1992), revd on othergrounds sub nom.Indep. Ins. Agents of Am., 508 U.S. at 445-47. In denying rehearing en banc, JudgeSentelle said:

Our colleagues question the judicial power of a federal court to decide an issue of lawconcededly dispositive of the case where parties have not raised the issue. I think it mostapparent that federal courts do possess this power. The alternative is that the partiescould force a federal court to render an advisory opinion. What the dissenters in effectargue is that the parties can stipulate to the state of underlying law; frame a law suit,assuming that stipulation; and obtain from the court a ruling as to what the otherwisedispositive law would be if the stipulated case were in fact the law.

Clarke, 965 F.2d at 1078 (Sentelle, J., concurring).

After the Supreme Court grantedcertiorari, the respondents argued that the court of appeals erredin considering the issue sua sponte. Indep. Ins. Agents of Am., 508 U.S. at 445. Here, the dissent attemptsto revive that argument. But, the Supreme Court dismissed the argument made by the dissent, the Clarke

Nor did they raise the issue of whether the voters referendum rejection of Public Act

4 rendered the Emergency Managers actions void. Both issues are potentially

dispositive of this appeal.

Generally, we have found that a party waives an issue when they have not raised

it or sufficiently addressed it. See, e.g.,Marks v. Newcourt Credit Grp., Inc., 342 F.3d

444, 462 (6th Cir. 2003) (holding that a party waives an issue when he fails to present

it in his initial briefs) (citations omitted). But, the waiver rule is neither jurisdictional

nor is it absolute. See, e.g.,In re Morris, 260 F.3d 654, 664 (6th Cir. 2001) (holding that

the waiver rule is an accepted practice or rule of procedure rather than a jurisdictional

bar to hearing issues for the first time on appeal) (citations omitted).

The dissent says that we are bound by the parties framing of the issues. But the

United States Supreme Court rejects a blanket rule. InIndependent Insurance Agents

of America, the Court held that courts of appeals have the discretion to consider issues

sua sponte despite the parties failure to raise the issue in the district court, the court of

appeals, or at oral argument. U.S. Nat. Bank of Or. v. Indep. Ins. Agents of Am., Inc. ,

508 U.S. 439, 445-47 (1993) (The contrary conclusion would permit litigants, byagreeing on the legal issue presented, to extract the opinion of a court on hypothetical

Acts of Congress or dubious constitutional principles, an opinion that would be difficult

to characterize as anything but advisory.).5


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dissenters, and the respondents. Id. at 446-47.

6See also Burkholder v. UAW Local No. 12, 299 F. Appx 531, 534 (6th Cir. 2008), overruled

on other grounds byChapman v. UAW Local 1005, 670 F.3d 677 (6th Cir. 2012);Dandridge v. Williams,397 U.S. 471, 476 n.6 (1970) (When attention has been focused on other issues, or when the court fromwhich a case comes has expressed no views on a controlling question, it may be appropriate to remand thecase rather than deal with the merits of that question in this Court.).

Despite the importance of whether Public Act 4 should have been given

immediate effect, or if the voters referendum rejection of Public Act 4 rendered the

Emergency Managers actions void, we should not decide these issues now because the

parties failed to develop these issues sufficiently for our review. In Independent

Insurance Agents of America, the Supreme Court found that the court of appeals sua

sponte consideration of the unasserted issue was proper only after giving the parties

ample opportunity to address the issue. Id. at 448.

Thus, we return these issues to the district court to develop a factual record and

consider the parties arguments. We have generally applied the waiver exception where

the issue involved a question of law that required no additional factual development.

See, e.g.,Morris, 260 F.3d at 664. But here, where additional fact-finding is necessary,

remand to the district court is more appropriate. See, e.g., City of Mt. Clemens v. EPA,

917 F.2d 908, 916 n.7 (6th Cir. 1990) (remanding to district court and declining to affirm

on alternative grounds [b]ecause these arguments were not addressed by the district

court and additional fact finding would be required to resolve the issues raised).6

The

parties failure to brief important state-law questions should not force this Court to

decide important federal constitutional questions. A remand is therefore the best course

of action.

In January 2013, after this Court heard oral argument, Michigans Attorney

General moved to intervene to brief the referendum rejection issue. While the Attorney

Generals supplemental briefing may aid a fact-finder considering these issues, the

district court should conduct that fact-finding. See Birth Control Ctrs., Inc. v. Reizen,

743 F.2d 352, 366 (6th Cir. 1984) (When an appellate court discerns that additional fact

findings are necessary, the usual rule is to remand for further proceedings to permit the


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7The dissent would grant the motion to intervene and direct the Michigan Attorney General to

file his brief within twenty-eight days.

trial court to make the necessary findings.). The motion to intervene is therefore

denied.7

Our decision is limited to this proceeding. On remand, the Attorney General

may refile its motion with the district court.

C. Immediate Effect

On remand, the district court should consider whether the Michigan Legislature

violated the Michigan Constitution when it gave Public Act 4 immediate effect. There

is reason to believe that it did.

Generally, the Michigan Constitution makes bills effective ninety days after the

end of the legislative session in which they are passed. Mich. Const. art. IV, 27. That

general rule, however, is subject to the immediate effect exception that permits the

Legislature to give immediate effectto acts by a two-thirds vote of the members elected

to and serving in each house. Id. (emphasis added).

Discussing the framers intent for this provision, the Michigan Supreme Court

said:

Several delegates expressed concern that granting the Legislature thepower to give immediate effect to any law would endanger thereferendum because it would not give the people time to gathersignatures for petitions to prevent the law from going into effect. Also,there was the danger that statutes would be passed without giving peopleadequate time to become acquainted with the statutes and adjust to thembefore they went into effect. To reduce this danger, the framers decidedto maintain the requirement that no act passed by the Legislature couldtake immediate effect unless passed by a two-thirds vote of the electedmembers of each house.

Frey v. Dept of Mgmt. & Budget, 414 N.W.2d 873, 880-81 (Mich. 1987) (emphasis

added) (footnotes omitted).


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8Rep. Kandrevas made the statement: I vote NO . . . and protest the events that transpired on the

floor today. . . . [including] an utter disregard for demands by the requisite number of voting members fora record roll call vote on the question of Immediate Effect.

9See, e.g., Mark Brush, Michigan Court of Appeals Rejects House Dems

Bid to Stop Immediate Effect , Michigan Radio (Aug. 16, 2012, 5:28 PM),http://www.michiganradio.org/term/immediate-effect; Paul Egan, Michigan Court ofAppeals Debates Republican Legislatures Immediate Ef fect, Detroit FreePress (Aug. 8, 2012, 12:40 PM), http://www.freep.com/apps/pbcs.dll/article?AID=/201208081240/NEW S 1 5 / 1 2 0 8 0 8 0 5 1 ; L i b b y S p e n c e r , M i c h i g a n H o u s e R e p u b l i c a n sRepeatedly Violated State Constitution, The Detroit News (Apr. 6, 2012, 4:13 PM),http://blogs.detroitnews.com/politics/2012/04/06/michigan-house-republicans-repeatedly-violated-state-constitution/; Jennifer White, Immediate Effect Sheds National Light on Michigan,S o W h a t ? , M i c h i g a n R a d i o ( A p r . 1 2 , 2 0 1 2 , 9 : 3 9 P M ) ,

The Michigan Legislature seems to have ignored the two-thirds vote requirement

when it gave Public Act 4 immediate effect. The Michigan Legislature has a Senate with

thirty-eight members and a House with 110 members. Thus, the two-thirds vote

requirement is twenty-six votes in the Senate and seventy-four votes in the House. But,

Public Act 4 passed in the House with sixty-two votestwelve short of the two-thirds

requirement for an immediate effect motion. Yet, despite the clear absence of the

necessary two-thirds vote, the House proceeded to give Public Act 4 immediate effect

over the objections of the minority party.8

To achieve this result, the House used a rule that allows it to conduct a rising

vote, where the presiding officer examines the chamber to see whether the requisite

two-thirds support exists. SeeHammel v. Speaker of House of Representatives, 825

N.W.2d 616, 619 (Mich. Ct. App. 2012), appeal denied, 829 N.W.2d 862 (Mich. 2013).

Apparently, a two-thirds vote occurs whenever the presiding officer says it

occursirrespective of the actual vote. This authority is unchecked and often results in

passing motions for immediate effect that could not receive the constitutionally required

two-thirds vote. Apparently, the Michigan Legislature believes the Michigan

Constitution can be ignored.

Public Act 4 exemplifies the farce. The Michigan House presiding officer

refused a request for a roll call vote and made Public Act 4 immediately effective

through the obvious fiction that twelve House members immediately changed their

positions. This process has been the subject of considerable contention and scrutiny.9


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http://www.michiganradio.org/post/immediate-effect-sheds-national-light-michigan-so-what;Paul Egan, Michigan House Democrats Lose Challenge to GOPs VoiceV o t e s t h a t G i v e L a w s I m m e d i a t e E f f e c t ( A u g . 1 7 , 2 0 1 2 ) ,http://www.freep.com/article/20120817/NEWS15/308170058/Michigan-House-Democrats-lose-challenge-to-GOP-s-voice-votes-that-give-laws-immediate-effect.

In effect, the Michigan Legislature has made their rising vote rule trump the Michigan

Constitution.

Despite the Michigan Constitutions express limitation, the Legislature has

perverted the immediate effect exception to swallow the constitutional rule. Under

Republican control of the House, in 2011, the Legislature passed 319 out of 323 bills

with immediate effect. In 2010, it passed 345 out of 363 bills with immediate effect.

Democrats have also abused the exception. Under Democratic control of the House, in

2006, the Legislature passed 664 out of 682 bills with immediate effect. Plainly, the

Legislature will not self-correct its abuse of the immediate effect exception because the

majority party controls and benefits from the process.

The issue has been examined by Michigans lower courts. SeeHammel, 825

N.W.2d at 618. InHammel, the plaintiffs said that under the Michigan Constitution,

article 4, 27, motions for immediate effect are required to be resolved by a roll call

vote, and that article 4, 18 prohibits a requirement that motions for immediate effect

and for a roll call vote be made orally. Id. at 619. The trial court agreed and entered

an order for a preliminary injunction. Id.

But the Michigan Court of Appeals reversed. Id. at 623. It found that the

plaintiffs had failed to demonstrate a likelihood of success on the merits because [t]he

constitutional provisions at issue permit the manner in which they are applied to be

determined by adoption of the rules of the House. Id. at 622. This reasoning make

little sense. The Michigan Constitution expressly limits the Legislatures power to give

laws immediate effect. Yet, the Michigan Court of Appeals says that the Michigan

Legislature has the power to decide whether that constitutional limitation applies?

Alternatively, the court of appeals also made the illogic finding that the plaintiffs failed


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to show irreparable harm because the plaintiffs ability to vote and the effectiveness of

their vote have not been impaired. Id.

On May 1, 2013, the Michigan Supreme Court denied the plaintiffs application

for leave to appeal theHammel case. Hammel v. Speaker of House of Representatives,

829 N.W.2d 862 (Mich. 2013). The dissent here characterizes the Michigan Supreme

Courts review as somehow affirming theHammel opinion. But the Michigan Supreme

Court simply has not spoken on the immediate effect issue and no conclusion can be

taken from its declining to review the case.

Where a states highest court has spoken to an issue, we are bound by that

decision unless we are convinced that the high court would overrule it if confronted with

facts similar to those before us. Kirk v. Hanes Corp. of N.C., 16 F.3d 705, 707 (6th Cir.

1994) (citation omitted). Where a state appellate court has resolved an issue to which

the high court has not spoken, the Supreme Court has said that the appellate court

decision is a datum for ascertaining state law which is not to be disregarded by a federal

court unless it is convinced by other persuasive data that the highest court of the state

would decide otherwise. W. v. AT&T Co., 311 U.S. 223, 237 (1940). We may refuseto follow intermediate appellate court decisions where we are persuaded that they fail

to reflect state law correctly, but we should not reject a state rule just because it was not

announced by the highest court of the state, even if we believe that the rule is

unsound. Ziebart Intl Corp. v. CNA Ins. Cos., 78 F.3d 245, 250-51 (6th Cir. 1996)

(quoting FL Aerospace v. Aetna Cas. & Sur. Co., 897 F.2d 214, 218-19 (6th Cir. 1990)).

On remand, the district court should consider whether the Michigan Supreme

Court would overruleHammel. There is reason to believe it would. The Michigan

constitutional provision seems obviously directed at restricting its Legislatures ability

to give bills immediate effect unless a real two-thirds of the elected members in each

house agree. And the court of appealss belief that house members do not need to vote

on immediate effect if they have had a chance to vote on the underlying legislation turns

Michigans Constitution article IV, 27 on its head.


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10See also People v. Asta, 72 N.W.2d 282, 287 (Mich. 1955) (It may fairly be said that the

imposition of the specific tax in question and amendment to the act in question have to do with the publicpeace, health and safety.); Newberry v. Starr, 225 N.W. 885, 887 (Mich. 1929) (The act relates toimportant state agencies having to do with preservation of public health, peace, and safety.); Mich.Taxpayers United, Inc. v. Governor, 600 N.W.2d 401, 403 (Mich. Ct. App. 1999) (Whether theLegislature properly gave immediate effect to the bill is a question of law that we review de novo.)(citation omitted).

Michigan courts do not refrain from scrutinizing the Legislatures determination

that a bill is passed with immediate effect. First, before 1963, the Michigan Constitution

imposed additional requirements on the Legislature before it could give a bill immediate

effect: it said that the bill must be immediately necessary for the preservation of the

public peace, health or safety. Indus. Bank of Wyandotte v. Reichert, 232 N.W. 235,

236 (Mich. 1930). At that time, when the Legislature said a bill should take immediate

effect, courts reviewed the Legislatures determination to ensure that the bill was

immediately necessary for those reasons. See, e.g.,Attorney Gen. v. Lindsay, 145 N.W.

98, 103 (Mich. 1914) (The determination of the Legislature by giving [the act]

immediate effect is not conclusive upon the courts, and they must decide, as a matter of

law, whether the act so declared is . . . within this constitutional provision. This is

clearly a judicial question.).10

Likewise, courts should review the Legislatures

compliance with the Michigan Constitutions two-thirds vote requirement to give a bill

immediate effect.

Second, in the federal system, the Supreme Court has said that courts should

review congressional procedural rules to determine if they violate the Constitution. See,

e.g., United States v. Ballin, 144 U.S. 1, 5 (1892) (The constitution empowers each

house to determine its rules of proceedings. It may not by its rules ignore constitutional

restraints or violate fundamental rights.) (emphasis added). A contrary rulethat the

Legislatures creation of procedural rules is not limited by constitutional

restraintscould lead to absurd results. The Michigan Legislature cannot end the

Michigan Constitutions two-thirds requirement by passing a rule saying it will ignore

the requirement. To conclude otherwise would effectively allow the Michigan

Legislature to unilaterally amend the Michigan Constitution.


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Because the Legislature gave Public Act 4 immediate effect, the bill purportedly

became effective on March 16, 2011, after the governor signed it into law. In December

2011, the Emergency Manager gave the orders we review in this case. Those orders

modified the retirement plans of over 1000 municipal retirees. But, if the Legislatures

attempt to give Public Act 4 immediate effect violated the Michigan Constitution, then

Public Act 4 would not have become effective until March 2012, ninety days after the

legislative session ended. Consequently, the Emergency Manager would not have

possessed the power to modify the employees retirement plans when he did.

The district court, after conducting additional fact-finding, could conclude that

the immediate effect issue resolves the case because the Emergency Manager did not

have the power to modify the employees retirement plans at the time he acted. Because

the immediate effect issue is potentially dispositive and is a state-law ground, we remand

to the district court.

D. Rejection by Referendum

Even if the Michigan Legislatures passage of Public Act 4 with immediate effect

did not violate the Michigan Constitution, remand is also warranted to allow the district

court to consider whether the voters November 2012 referendum of Public Act 4 voided

the Emergency Managers actions. After Michigan voters rejected Public Act 4, do

actions taken under Public Act 4 continue to have effect?

In an August 6, 2012, opinion (the Referendum Opinion), the Michigan

Attorney General said that:

If 2011 PA 4 [Public Act 4] is disapproved by voters pursuant to thepower of referendum under Const 1963, art 2, 9, that law will no longerhave any effectand the formerly repealed law, 1990 PA 72 [Public Act72], is permanently revived upon certification of the November 2012general election results.

Once the effect of 2011 PA 4 [Public Act 4], the Local Government andSchool District Fiscal Accountability Act, MCL 141.1501 et seq., wassuspended under Const 1963, art 2, 9 and MCL 168.477(2), the priorrepealed law, 1990 PA 72 [Public Act 72], is revived until certification


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12On remand, the district court should also consider whether the Michigan Legislature possesses

the power to retroactively immunize its own acts that the voters rejected by referendum. Because of thevoters rejection of Public Act 4 by referendum, and because Public Act 4 is substantially similar to PublicAct 436, such a power could infringe on the voters referendum power under the Michigan Constitutionarticle II, 9.

The Michigan Constitution thus merely outlines the referendum process. It does

not say what effect a referendum rejection has on action taken under the rejected statute,

but before the referendum. While Michigan Compiled Laws 168.477(2) says that a

law that is the subject of the referendum continues to be effective until the referendum

is properly invoked, 168.477(2) controls only to suspend operation of the challenged

statute until the voters decide the referendum. Put simply, properly invoked more

likely describes certification of the referendum for the ballot, and 168.477(2) does not

control after rejection of the statute by the voters. The Michigan Constitution outlines

only the procedures for, and not the effect of, referendum.

Third, in Public Act 436, the successor to Public Act 4, the Michigan Legislature

arguably expressed doubt about the lawfulness of Emergency Manager action taken

before the November 2012 referendum. Specifically, Public Act 436 provides:

All proceedings and actions taken . . . under former 2011 PA 4 [PublicAct 4], former 1988 PA 101, or former 1990 PA 72 [Public Act 72]before the effective date of this act are ratified and are enforceable as ifthe proceedings and actions were taken under this act.

Mich. Comp. Laws 141.1544. Thus, by making prior Emergency Manager actions

taken under Public Act 4 or Public Act 72 enforceable as if they were taken under Public

Act 436, the Legislature seems to have anticipated that courts would find past

Emergency Manager actions unlawful.12

Consequently, it is arguable that even the

Legislature expressed doubt about the lawfulness of past Emergency Manager actions

in light of the voters rejection of Public Act 4.

Fourth, in state court filings, the Michigan Attorney General has failed to cite to

any authority supporting his position that the Emergency Managers actions under Public

Act 4 are valid after the referendum. To the contrary, in his brief to the Michigan


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Supreme Court in Davis v. Roberts, 810 N.W.2d 555 (Mich. 2012), the Michigan

Attorney General says that the rejection of a law by referendum is more powerful than

the repeal of a law because the rejection erases the Legislatures and Governors

original enactment. Opposition Brief for Appellee at 16Davis v. Roberts, 810 N.W.2d

555 (Mich. 2012) (No. 146187) (emphasis added).

The Attorney General suggests that the referendum rendered prior Emergency

Manager actions void. Yet, in the same brief, the Attorney General also says [t]he

voters rejection does not render [Public Act 4] void ab initio since it was lawfully

enacted by the Legislature in the first instance. Thus the disapproval has no effect on

lawful actions taken by the emergency managers during the time [Public Act 4] was

effective. Id. at 21. Despite recognizing that a referendum is more powerful than a

repeal, and despite saying that the referendum erase[d] Public Act 4, the Michigan

Attorney General seems to argue the inconsistent position that the Emergency Managers

action under Public Act 4 are valid after the referendum. The district court should

consider this issue after more specific briefing. Consequently, we remand to the district

court so that it can decide if the voters referendum rendered the Emergency Managers

actions void.

III. Conclusion

We refuse to rush to decide federal constitutional issues. Because the

immediate effect issue and the referendum issue are state-law grounds on which the

Court could decide this case, we vacate and remand to the district court to conduct

additional fact-finding and consider these issues.


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_________________

DISSENT

_________________

GRIFFIN, Circuit Judge, dissenting. The majority remands the case to the

district court on the grounds that issues of state law never raised by the parties could

provide an alternative basis for deciding this case. In doing so, the majority misapplies

the constitutional avoidance doctrine, directs the district court to address issues more

appropriately left to the Michigan courts, and unjustifiably departs from our well-

established principles of appellate review that generally bar this court from deciding

issues that are not argued, preserved, or ruled upon by the lower court or tribunal. In my

view, only the federal constitutional issues raised by the parties are properly before us.

Addressing those issues, I would affirm the district courts judgment because it did not

abuse its discretion when it denied the Retired Employees request for injunctive relief.

In addition, I would grant the Michigan Attorney Generals motion to intervene.

Accordingly, I respectfully dissent.

I.

In enacting 2011 PA 4, the Michigan Legislature recognized that the health,

safety, and welfare of the citizens of this state would be materially and adversely

affected by the insolvency of local governments and the fiscal accountability of local

governments is vitally necessary . . . to assure the provision of necessary governmental

services essential to public health, safety, and welfare. Mich. Comp. Laws 141.1503.

The law permitted the state to take action and to assist a local government in a

condition of financial stress or financial emergency . . . by requiring prudent fiscal

management and efficient provision of services, permitting the restructuring of

contractual obligations, and prescribing the powers and duties of state and local

government officials and emergency managers. Id. It authorized emergency managers

(EMs) to temporarily reject, modify, or terminate existing collective bargaining


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agreements (CBAs) if certain conditions were met. Id. at 141.1519(1)(k), (k)(iv).

It also allowed them to adopt or amend ordinances. Id. at 141.1519(1)(dd).

The City of Pontiac has experienced difficult economic times and has been

operating under an emergency manager for many years. For the fiscal year ending

June 30, 2008, the city budget deficit was $7,007,957; for the fiscal year ending June 30,

2009, the deficit was $5,607,638; and for the fiscal year ending June 30, 2010, the deficit

was $4,089,199. For the fiscal year ending June 30, 2011, the budget indicates that there

was a surplus of $554,732, but apparently only because the City of Pontiac failed to

make certain contributions in excess of $11 million. For the fiscal year ending June 30,

2012, the budget projects a deficit of $8,376,527. For the fiscal year ending June 30,

2013, the budget projects that expenses will exceed revenue by $5,903,485.

For the fiscal year ending June 30, 2013, although a budget surplus is expected

from the sale of a wastewater treatment facility, which is to be transferred to Oakland

County, the EM believes that declining property taxes and unfunded liabilities continue

to create a structural deficit in the city budget. The City of Pontiacs unfunded liability

to the General Employees Healthcare System is over $221 million, and its unfundedliability to the Police and Fire System is over $81 million. At present, retiree healthcare

is the City of Pontiacs largest expense. For the fiscal year ending June 30, 2013, it will

spend $13.5 million on medical and dental insurance coverage, of which only $1.2

million is for current employees.

Over the years, the City of Pontiac has negotiated numerous CBAs under which

it has contracted to provide health insurance coverage for certain municipal retirees. In

addition, with regard to non-union retirees, Chapter 92 established a plan and trust to

provide health care and life insurance benefits . . . for the welfare of certain retirees of

the city who are eligible to receive a retirement benefit . . . and the spouses and eligible

dependents of such retirees through a prefunded group health and insurance benefits

plan. The City of Pontiac has also promised certain health insurance benefits by virtue

of separation agreements and past practice.


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At issue in this case are the EMs actions, made pursuant to PA 4, to address the

City of Pontiacs financial troubles. In a series of orders issued in December 2011, the

EM modified CBAs and other agreements in such a way that shifted the cost of

prescriptions and insurance co-payments onto retirees. The EM also repealed Chapter

92.

The Retired Employees filed a class action in federal court, asserting the

following federal claims: (1) impairment of contract under the federal constitution; (2)

federal preemption in the area of municipal debt reduction; and (3) deprivation of a

property interest without due process of law. On these grounds, among others, the

Retired Employees asked the district court to enjoin the City of Pontiac from

implementing proposed changes to their healthcare benefits and to reinstate their

coverage to previous levels.

The district court denied the Retired Employees request for injunctive relief, and

this appeal followed. The issues presented in this case and controversy are limited to

whether the Retired Employees are entitled to injunctive relief based on an

unconstitutional impairment of contract, preemption under federal bankruptcy law, ordeprivation of a property interest without due process of law.

II.

Rather than address the issues ruled on below and raised by the parties on appeal,

the majority contrives potentially dispositive state-law grounds for resolving this case,

under the guise of constitutional avoidance. Specifically, the majority questions

whether PA 4 was properly given immediate effect and whether the EMs past actions

remain valid in light of the voters rejection by referendum. Having raised these issues

sua sponte, the majority directs the district court to address them on remand.

In doing so, the majority misunderstands and misapplies the constitutional

avoidance doctrine. As explained inAshwander v. Tenn. Valley Auth., 297 U.S. 288,

346 (1936) (Brandeis, J., concurring), [t]he Court developed . . . a series of rules under


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which it has avoided passing upon a large part of all the constitutional questions pressed

upon it for decision. Among them is the rule against anticipat[ing] a question of

constitutional law in advance of the necessity of deciding it. Id. (internal quotation

marks omitted). It is not the habit of the court to decide questions of a constitutional

nature unless absolutely necessary to a decision of the case. Id. (internal quotation

marks omitted). This avoidance principle does not apply here, first, because the federal

constitutional questions raised in this case are not anticipated. Rather, the issues were

ruled on below and are properly presented on appeal. We unquestionably have

jurisdiction to adjudge the legal rights of litigants in actual controversies. Liverpool,

N.Y. & P. S.S. Co. v. Commrs of Emigration, 113 U.S. 33, 39 (1885).

Second, the constitutional avoidance doctrine presumes that a nonconstitutional

ground for resolving the case is properly before the court. Ashwander, 297 U.S. at 347

(Brandeis, J., concurring). The Court will not pass upon a constitutional question

although properly presented by the record, if there is alsopresentsome other ground

upon which the case may be disposed of. Id. (emphasis added). The majority asserts

that we should not allow the litigants to force us into deciding constitutional questions,

apparently believing that courts are responsible for framing the issues. This is not so.

[W]e rely on the parties to frame the issues for decision, as [o]ur adversary system

is designed around the premise that the parties know what is best for them, and are

responsible for advancing the facts and arguments entitling them to relief. Greenlaw

v. United States, 554 U.S. 237, 243, 244 (2008) (internal quotations marks omitted);

accord Carducci v. Regan, 714 F.2d 171, 177 (D.C. Cir. 1983) (Scalia, J.) (The

premise of our adversarial system is that appellate courts do not sit as self-directed

boards of legal inquiry and research, but essentially as arbiters of legal questions

presented and argued by the parties before them.).

In addition, we should not avoid a constitutional question when its resolution is

necessary to dispose of the case. Ashwander, 297 U.S. at 347 (Brandeis, J., concurring).

Here, the majority concedes that the state issues are merely potentially dispositive.

Although offering an opinion on their resolution, the majority admits that the case cannot


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1The majority is correct that, before 1963, the Michigan courts would scrutinize whether the

legislature properly passed a bill with immediate effect. At the time, the state constitution limited theavailability of immediate effect to acts immediately necessary for the preservation of the public peace,health or safety, Mich. Const. 1908, art. 5, 21, and courts would review the legislative determinationof public necessity, seeAttorney General ex rel. Barbour v. Lindsay, 145 N.W. 98, 103 (Mich. 1914). TheMichigan Constitution no longer imposes a public necessity requirement. See Mich. Const. 1963, art. 4, 27.

be decided on the basis of state law because the parties have failed to develop these

issues sufficiently for our review. Indeed, the parties have failed to argue or develop

them at all.

Just as the majority is incapable of deciding the case on state-law grounds, there

is no reason to believe that the district court will be able to do so on remand. The

Michigan Constitution provides that the legislature may give immediate effect to acts

by a two-thirds vote of the members elected to and serving in each house. Const. 1963,

art. 4, 27. Significantly, whether the House passes an act and whether it gives it

immediate effect are two separate votes. For example, the House passed HB 4246 and

HB 4929 by less than a two-thirds vote, yet two-thirds of the House voted orally in favor

of their immediate effect. Hammel v. Speaker of House of Representatives (Hammel I),

825 N.W.2d 616, 619 (Mich. Ct. App. 2012). Thus, the mere fact that the House passed

PA 4 short of a two-thirds vote is not reason to doubt the validity of its immediate effect.

InHammelI, the plaintiffs sought to enjoin the immediate effect of HB 4246 and

HB 4929, arguing that the Michigan Constitution required a role call vote on the record,

but the Michigan Court of Appeals rejected the argument. The court explained that [a]general challenge to the governing procedures in the House of Representatives is not

appropriate for judicial review.1 Id. The court also observed that the House rule

allowing motions for immediate effect to be resolved by a rising vote did not conflict

with the plain language of 27, and, in any case, the plaintiffs did not challenge the

House rule. Id. at 621. According to the court, an injunction was improper because

[t]he constitutional provisions at issue permit the manner in which they are applied to

be determined by adoption of the rules of the House, which [the] plaintiffs concede they

do not challenge, and which we do not oversee. Id. at 622. The Michigan Supreme


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Court denied the plaintiffs application for leave to appeal. Hammel v. Speaker of the

House of Representatives (Hammel II), 829 N.W.2d 862 (Mich. 2013). Thus,Hammel

Iis the law of Michigan. Contrary to the majoritys assertion, I do notcharacterize

Hammel IIas somehow affirmingHammel I. Rather, I characterizeHammel IIas a

denial of leave to appeal, the effect of which leavesHammel Iintact. Michigan Court

Rule 7.215(J)(1) provides that published decisions of the Michigan Court of Appeals

issued on or after November 1, 1990, are precedentially binding on subsequent panels

of the Michigan Court of Appeals. Accordingly,Hammel Iis precedent on this issue

until or unless it is overruled by the Michigan Supreme Court.

The majority apparently disagrees with theHammel Idecision. According to the

majority, the reasoning inHammel Ion this issue of state law make[s] little sense. But

because lower federal courts are precluded from exercising appellate jurisdiction over

final state-court judgments, it is unclear what the majority hopes to be accomplished

on remand. Marks v. Tennessee, 554 F.3d 619, 622 (6th Cir. 2009) (internal quotation

marks omitted). A federal court is bound by a state appellate courts judgment on a

question of state law absent a strong showing that the states highest court would decide

the issue differently. Kirk v. Hanes Corp. of N.C., 16 F.3d 705, 707 (6th Cir. 1994)

(internal quotation marks omitted); accord West v. AT&T, 311 U.S. 223, 237 (1940)

(explaining that a federal court lacks authority to disregard a state appellate courts

judgment on a question of state law unless it is convinced . . . that the highest court of

the state would decide otherwise). Where, as here, the highest court has refused to

review the lower courts decision, the possibility that it will reach a conclusion contrary

to that decision at a later date remains a matter of conjecture. West, 311 U.S. at

23738. Thus, because there does not exist a strong showing that the Michigan

Supreme Court would reach a contrary conclusion, Hammel I is binding on federal

courts, and, consequently, the federal district court has no basis to question the validity

of PA 4s immediate effect on remand.

It is also inappropriate to direct the district court to review whether the rejection

by referendum of PA 4 rendered the EMs past actions void. The Michigan courts have


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2Courts frequently confuse the concepts of waiver and forfeiture. Waiver is the intentional

relinquishment or abandonment of a known right, whereas forfeiture is the failure to make the timelyassertion of a right. United States v. Olano, 507 U.S. 725, 733 (1993). Here, there was an express waiverregarding one of the issues and a forfeiture of the other.

not squarely addressed this issue. The Michigan courts are in a better position to rule

on novel questions of Michigan law. Scottsdale Ins. Co. v. Flowers, 513 F.3d 546, 560

(6th Cir. 2008). It is especially inappropriate for a federal court to rule on an

unanswered question of state law sua sponte. In United States National Bank of Oregon

v. Independent Insurance Agents of America, 508 U.S. 439, 44647, cited by the

majority, the United States Supreme Court approved the D.C. Circuits sua sponte

consideration of an issue offederal law, relying on the Article III federal judicial power,

which extend[s] to all Cases . . . arising under . . . the Laws of the United States. Art.

III, 2, cl. 1. However, the decision does not support a federal courts sua sponte

consideration of novel questions ofstate law, as ordered here. To my knowledge, the

majoritys chosen action is unprecedented.

The issues created by the majority have not been raised, decided, or preserved.

The Retired Employees have never (neither below nor on appeal) argued that PA 4 was

improperly given immediate effect or its rejection by referendum rendered the EMs past

actions void, thereby forfeiting those issues. Moreover, the Retired Employees expressly

waived the latter issue at oral argument.2

Imprudently, my colleagues have departed

from our proper judicial role by becoming advocates in their zeal to create controversies

that do not exist.

As a general rule, appellate courts do not consider any issue not passed upon

below. In re Morris, 260 F.3d 654, 663 (6th Cir. 2001). Our cases have developed

three circumstances that justify departure from the general rule. Id. at 664. Under the

exception relied on by the majority, although not passed upon below, this court may

address issues presented with sufficient clarity and requiring no factual development

where their resolution would promote the finality of litigation in the case. Id. Issues are

presented with sufficient clarity when extensively briefed by both parties. United

States v. Pickett, 941 F.2d 411, 415 (6th Cir. 1991). Here, the parties never raised the


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issues (much less extensively briefed them), and the majority concedes that the issues

lack the factual development necessary for their resolution. More importantly, the

resolution of the issues on remand will not serve the interest of finality, because the

district courts decision will not be precedentially binding regarding Michigan law. Doe

v. Young Marines of the Marine Corps League, 745 N.W.2d 168, 172 (Mich. Ct. App.

2007) (We are not bound to follow a federal courts interpretation of state law[.]).

The cases relied on by the majority do not involve forfeited or waived issues.

See Dandridge v. Williams, 397 U.S. 471, 476 n.6 (1970); Burkholder v. Intl Union,

United Auto., Aerospace & Agric. Implement Workers of Am., Local No. 12, 299 F.

Appx 531, 534 (6th Cir. 2008), overruled on other grounds by Chapman v. UAW Local

1005, 670 F.3d 677 (6th Cir. 2012); City ofMt. Clemens v. EPA, 917 F.2d 908, 916 n.7

(6th Cir. 1990). Rather, in those cases, the preserved issues raised and argued below

were simply not addressed by the lower court. In such situation, [w]hen attention has

been focused on other issues, or when the court from which a case comes has expressed

no views on a controlling question, the appellate court may find it appropriate to

remand the case for additional factual development and resolution by the lower court.

Dandridge, 397 U.S. at 476 n.6. But forfeiture or waiver is not the appropriate term

for this occurrence. The majoritys reliance onDandridge,Burkholder, andMt. Clemens

is therefore misplaced.

In addition to dissenting from the consideration of waived and forfeited issues,

I also respectfully dissent from the majoritys order denying the Michigan Attorney

Generals motion to intervene. In the rare case when sua sponte consideration on appeal

is proper, interested parties should be provided ample opportunity to address the issue.

Indep. Ins. Agents of Am., 508 U.S. at 448. My colleagues disregard this principle.

Having characterized the state-law issues as important and potentially dispositive of the

case, the majority paradoxically denies the Attorney Generals request to defend the

states position with respect to those issues. They do this despite the Attorney Generals

statutorily protected right to intervene in any matter in which the people of Michigan


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may be interested. See Mich. Comp. Laws 14.28. In my view, allowing intervention

on remand provides inadequate recourse to the damage the majority has done already.

III.

Only the federal constitutional issues ruled on below and raised by the parties on

appeal are properly before us and therefore should be decided. We review the district

courts denial of injunctive relief for an abuse of discretion. Overstreet v. Lexington-

Fayette Urban Cnty. Govt, 305 F.3d 566, 573 (6th Cir. 2002). We review a district

courts underlying legal conclusions de novo and its factual findings for clear error. Ne.

Ohio Coal. for the Homeless v. Husted, 696 F.3d 580, 591 (6th Cir. 2012). Our review

is highly deferential, and we will disturb the district courts determination only if the

district court relied upon clearly erroneous findings of fact, improperly applied the

governing law, or used an erroneous legal standard. McNeilly v. Land, 684 F.3d 611,

614 (6th Cir. 2012) (internal quotation marks omitted).

A district court evaluating a plaintiffs request for injunctive relief considers four

factors: (1) the plaintiffs likelihood of success on the merits; (2) whether the plaintiff

will suffer irreparable injury without a preliminary injunction; (3) whether issuance of

a preliminary injunction would cause substantial harm to others; and (4) whether the

public interest would be served by issuance of a preliminary injunction. Id. at 615.

When a party seeks a preliminary injunction on the basis of a potential constitutional

violation, the likelihood of success on the merits often will be the determinative

factor. Obama for Am. v. Husted, 697 F.3d 423, 436 (6th Cir. 2012) (quoting Jones

v. Caruso, 569 F.3d 258, 265 (6th Cir. 2009)). The burdens of production and

persuasion fall on the plaintiff. McNeilly, 684 F.3d at 615. [T]he proof required for the

plaintiff to obtain a preliminary injunction is much more stringent than the proof

required to survive a summary judgment motion; an injunction is an extraordinary

remedy available only when the circumstances clearly demand it. Leary v.

Daeschner, 228 F.3d 729, 739 (6th Cir. 2000) (internal quotation marks omitted).


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A. Likelihood of Success on the Merits

1. Contracts Clause

The district court determined that the Retired Employees failed to show a

likelihood of success on the merits of their Contracts Clause claim. It reached this

conclusion because they challenged the EMs actions, which it determined did not

constitute an exercise of a legislative power, making the Contracts Clause inapplicable.

See New Orleans Waterworks Co. v. La. Sugar Refining Co. , 125 U.S. 18, 30 (1888)

(The prohibition [against the impairment of contracts] is aimed at the legislative power

of the State, and not at the decisions of its courts, or the acts of administrative or

executive boards or officers, or the doings of corporations or individuals.); Ross v.

Oregon, 227 U.S. 150, 162 (1913). Second, the district court stated that the Retired

Employees failed to allege that the state denied them an opportunity to seek recourse

through the courts or that the state foreclosed the imposition of an adequate state remedy

for an established impairment. See Crosby v. City of Gastonia, 635 F.3d 634, 640 (4th

Cir. 2011) ([R]ecourse to 1983 for the deprivation of rights secured by the Contracts

Clause is limited to the discrete instances where a state has denied a citizen theopportunity to seek adjudication through the courts . . . or has foreclosed the imposition

of an adequate remedy for an established impairment. Section 1983 provides no basis

to complain of an alleged impairment in the first instance.).

The court also indicated that some impairments of contract are constitutional, but

this does not appear to be a basis for its conclusion that the Retired Employees claim

was unlikely to succeed. Nonetheless, this court may affirm based on any reason

advanced by the City of Pontiac against the issuance of a preliminary injunction that was

presented before the district court. United Food & Commercial Workers Union, Local

1099 v. Sw. Ohio Regl Transit Auth., 163 F.3d 341, 349 (6th Cir. 1998). Therefore, it

is appropriate to consider the City of Pontiacs claim that the alleged impairment

survives constitutional scrutiny.


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The Contracts Clause provides that No state shall . . . pass any . . . Law

impairing the Obligation of Contracts. U.S. Const. art. I 10, cl. 1. The prohibition

against impairments of contracts, however, is not absolute. Home Bldg. & Loan Assn

v. Blaisdell, 290 U.S. 398, 428 (1934). A claim under the Contracts Clause requires a

showing that: (1) a contract exists, (2) a change in law impairs that contract, and (3)

the impairment is substantial. Mascio v. Pub. Emps. Ret. Sys. of Ohio, 160 F.3d 310,

313 (6th Cir. 1998) (internal quotation marks omitted). Absent such a showing, there

is no constitutional violation.

In this case, it is apparent that the EM impaired the contractual rights of at least

some retirees who had been guaranteed various healthcare benefits in CBAs. Indeed,

if such contractual rights did not exist or had expired, then seemingly, it would have

been unnecessary for the EM to utilize his power under PA 4 to modify the CBAs.

Assuming a contractual impairment, the question becomes whether the

impairment is substantial. A court assessing whether an impairment is substantial

considers the extent to which reasonable expectations under the contract have been

disrupted. Buffalo Teachers Fedn v. Tobe, 464 F.3d 362, 368 (2d Cir. 2006) (internalquotation marks omitted). In Buffalo Teachers Fedn, the Second Circuit determined

that a wage freeze worked such a disruption to employees reasonable expectations to

contractually negotiated wage increases that the impairment was substantial. Id.

Because this case involves a reduction of benefits, as opposed to a freeze of benefits, the

impairment here very well may be more substantial than inBuffalo Teachers Fedn. For

this reason, and because defendants do not argue otherwise, a substantial impairment can

be presumed.

If the impairment is substantial, to survive constitutional scrutiny, the

government must have a legitimate public purpose behind the impairment, and the

impairment must be reasonable and necessary to serve that purpose. Energy Reserves

Grp., Inc. v. Kan. Power & Light Co., 459 U.S. 400, 41112 (1983); U.S. Trust Co. of

N.Y. v. New Jersey, 431 U.S. 1, 25 (1977). A legitimate public purpose is one aimed


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at remedying an important general social or economic problem rather than providing a

benefit to special interests.Buffalo Teachers Fedn, 464 F.3d at 368 (internal quotation

marks omitted). An impairment may be considered reasonable and necessary if:

(1) impairing the contract was considered on par with other policy alternatives; (2) a

more moderate course would not have served the legitimate public purpose equally well;

and (3) the impairment was reasonable in light of the surrounding circumstances. Id. at

371.

The City of Pontiac argues that impairing the Retired Employees contractual

rights was reasonable and necessary to serve a legitimate public purpose. The City of

Pontiac relies onBuffalo Teachers Fedn, where several teachers unions sought to enjoin

a wage freeze implemented by the city board pursuant to the Buffalo Fiscal

Responsibility Authority Act. Id. at 36566. Pursuant to the Act, the city board froze

the wages of union members, despite contractually negotiated wage increases that had

been memorialized in CBAs. Id. at 366. The district court granted the defendants

motion for summary judgment, concluding as a matter of law that the wage freeze did

not violate the Contracts Clause, and the Second Circuit affirmed. Id. at 367, 376.

The Second Circuit determined that the wage freeze was a reasonable and

necessary means of addressing the citys fiscal crisis. Id. at 36871. First, the wage

freeze was implemented only after other alternatives had been considered and tried,

including a hiring freeze and school closings and layoffs. Id. at 371. Second, a

temporary wage freeze was moderate relative to the more drastic measure of eliminating

more municipal jobs and closing more schools. Id. As a further indication of

reasonableness, the court considered the temporary and prospective nature of the wage

freeze. Id. at 372. Finally, although the unions argued that the existence of alternatives

made the wage freeze unnecessary, the court declined to second-guess the wisdom of

picking the wage freeze over other policy alternatives, especially those that appear more

Draconian, such as further layoffs or elimination of essential services.Id. Accordingly,

the impairment survived constitutional scrutiny. Id.


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to pay the $100 co-payment only after they failed to jump through those same hoops.

Id. at 8. Unlike the plaintiffs in Yurk, the Retired Employees have not advanced a more

moderate course.

The Retired Employees also point to Providence Retired Police & Firefighters

Assn v. City of Providence, 2012 R.I. Super. LEXIS 23 (R.I. Super. Ct. Jan. 30, 2012),

a case involving the constitutionality of an ordinance requiring retirees to enroll in

Medicare as a condition of receiving healthcare benefits, contrary to the terms of their

CBAs. Granting the retirees motion for a preliminary injunction, the court found two

indications that the ordinance was unreasonable: (1) Providence was aware of its

chronic financial problems when it continuously entered into CBAs guaranteeing

healthcare benefits; and (2) the transfer to Medicare was intended to be permanent. Id.

at *52, 56. Many of the CBAs at issue here, however, were entered into long before the

City of Pontiac could have anticipated the economic crisis that has set in over the last

several years, and it is unclear whether shifting healthcare costs onto retirees is intended

to be permanent.

Lastly, the Retired Employees call our attention to Welch v. Brown, No. 12-13808, 2013 WL 1292373 (E.D. Mich. Mar. 29, 2013), where the plaintiffs argued that

the reduction of their healthcare benefits was unreasonable and unnecessary, and they

suggested more moderate alternatives that would achieve the defendants stated

legitimate public purpose. In this case, however, the Retired Employees have not argued

that the reduction of their benefits was unreasonable and unnecessary, and they have not

suggested a more moderate course that would address the City of Pontiacs fiscal crisis.

Moreover, in all of the above cases (Yurk, Providence Retired Police &

Firefighters Assn, andWelch), the court ruled on a request for injunctive relief in the

first instance. Our judgment as an appellate court is confined by the standard of review.

We can reverse only when we are convinced that the district court abused its discretion.

That a court couldreasonably grant a preliminary injunction in the first instance does not

make the district courts decision in this case an abuse of discretion. Albeit for different


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reasons than relied on below, I would conclude that the district court acted within its

discretion when it concluded that the Retired Employees failed to show a likelihood of

success on the merits of their Contracts Clause claim. This factor weighs in favor of the

City of Pontiac.

2. Federal Preemption

The Retired Employees next allege that the EMs orders are preempted by the

Bankruptcy Code, 11 U.S.C. 903(1), which provides that a State law prescribing a

method of composition [i.e., reduction] of indebtedness of [a] municipality may not bind

any creditor that does not consent to such composition. Although the Retired

Employees certainly did not consent to the reduction of their healthcare benefits, they

fail to offer authority supporting their contention that PA 4 prescribes a method of

composition, and the only authority on point that has been brought to this courts

attention suggests the contrary. See Subway-Surface Supervisors Assn v. New York City

Transit Auth., 375 N.E.2d 384, 391 (N.Y. 1978) (holding that a wage freeze in violation

of a CBA made pursuant to the Financial Emergency Act for the City of New York did

not constitute composition and, thus, was not preempted by federal bankruptcy law).

This is not a bankruptcy proceeding, and the EMs orders do not purport to

discharge any incurred debt. Rather, the EMs orders modify the terms of CBAs, a

measure that appears to be an effort to eliminate the incurrence of additional debt.

Further, the Supreme Court has sustained provisions arguably affecting the bankruptcy

power where the state laws were not directly in conflict with the Bankruptcy Act and

has stress[ed] that the federal municipal Bankruptcy Act is not in any way intended to

infringe on the sovereign power of a state to control its political subdivisions. Ropico,

Inc. v. City of New York, 425 F. Supp. 970, 983 (S.D. N.Y. 1976). Because the Retired

Employees preemption arguments are not well supported, a likelihood of success on the

merits at this stage has not been established, and this factor weighs in favor of the City

of Pontiac.


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3. Due Process

Third, the district court determined that the Retired Employees were unlikely to

succeed on the merits of their due process claims. To establish a procedural due process

claim, a plaintiff must demonstrate that he or she has been deprived of a protected

property interest without adequate process. Womens Med. Profl Corp. v. Baird, 438

F.3d 595, 611 (6th Cir. 2006). A contract, such as a collective bargaining agreement,

may create a property interest. Leary, 228 F.3d at 741. Yet it is unclear whether there

can be a property interest in lifetime, unchanging healthcare benefits. See Bell v.

Westmoreland Cent. Sch. Dist., No. 87-CV-1592, 1991 WL 33161, *3 (N.D. N.Y. Mar.

11, 1991) (stating that a constitutionally protected property interest in the continuation

of post-retirement health insurance benefits does not exist); cf. Lawrence v. Town of

Irondequoit, 246 F. Supp. 2d 150, 158 (W.D. N.Y. 2002) (finding no constitutionally

protected property interest where the plaintiffs continued to receive retirement benefits

but at a different level).

Further, having reviewed the excerpts of CBAs provided by the Retired

Employees, as the district court observed, there is no provision forever entitling retireesto the exact same healthcare benefits. Indeed, such a guarantee would be impractical;

as the City of Pontiac asserts, the insurance provided ten years ago is not even

commercially available. Additionally, in the context of an ERISA claim, this court has

stated that [i]f a welfare benefit has not vested, after a CBA expires, an employer

generally is free to modify or terminate any retiree medical benefits that the employer

provided pursuant to that CBA. Yolton v. El Paso Tenn. Pipeline Co., 435 F.3d 571,

578 (6th Cir. 2006) (internal quotation marks omitted). Because we have not been

provided with the CBAs in their entirety, it is difficult to discern the intent of the

contracting parties and whether healthcare benefits were guaranteed indefinitely or were

instead subject to change. Accordingly, the Retired Employees have failed to carry their

burden to demonstrate a likelihood of success on the merits of their due process claim,

which tends to weigh in favor of the City of Pontiac.


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B. Irreparable Harm

Turning to the next factor in the preliminary injunction analysis, the district court

determined that the Retired Employees failed to show that they would suffer irreparable

harm if an injunction were not granted. One way to show irreparable harm is by

demonstrating a constitutional violation. See Overstreet, 305 F.3d at 578. As explained

in detail above, however, the Retired Employees have not shown a reasonable likelihood

that their constitutional rights have been violated, a conclusion which tends to weigh

against a finding of irreparable harm.

The other source of irreparable harm asserted in this case is the reduction of

retiree healthcare benefits. The district courts analysis of this argument is very limited.

Although acknowledging that the EMs orders reduce the Retired Employees healthcare

benefits and force them to pay more out-of-pocket expenses (or forego medical

treatment), the court did not consider the harm to be irreparable given that their benefits

were not being eliminated entirely. The district courts reasoning is not compelling and

overlooks the threat to the Retired Employees health and safety caused by even a

reduction in coverage. A reduction in healthcare benefits is a recognized source ofirreparable harm for purposes of a preliminary injunction. See Golden v. Kelsey-Hayes

Co., 845 F. Supp. 410, 415 (E.D. Mich. 1994) (stating that reductions in retiree

insurance coverage constitute irreparable harm); Hinckley v. Kelsey-Hayes Co., 866 F.

Supp. 1034, 1044 (E.D. Mich. 1994) (same). With this in mind, but taking into account

that a constitutional violation is unlikely, this factor weighs slightly in favor of the

Retired Employees.

C. Balance of Equities and Public Interest

Nonetheless, the harm to the Retired Employees must be balanced against the

threatened harm to others, and consideration must also be given to the public interest.

The district court concluded that issuing an injunction would likely cause the City of

Pontiacs financial troubles to continue, which would likely result in a complete

elimination of healthcare benefits for the Retired Employees, further layoffs, and fewer


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public services being provided for the benefit of all residents. Given the drastic

measures that the City of Pontiac has already taken to address its fiscal crisis, I cannot

disagree with the district courts forecast. These factors thus weigh against the Retired

Employees. Balancing the four factors together, and given the highly deferential

standard of review, I would hold that the district court did not abuse its discretion when

it denied the extraordinary remedy of injunctive relief.

IV.

In my view, the majority improperly remands the case to the district court to

address uncontested issues of state law. Instead, I would address the federal

constitutional issues raised on appeal and affirm the district courts judgment denying

the Retired Employees request for injunctive relief. In addition, I would grant the

Attorney Generals motion to intervene. For these reasons, I respectfully dissent.

city of pontiac retired employees ass'n v. schimmel, no. 12-2087 (6th cir. aug. 9, 2013)

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